UPDATE 1-Merkel says "very optimistic" on EU budget deal
* EU leaders meet next week on 2014-2020 budget
* Merkel optimistic there will be a deal
* Monti says Italy pays too much, wants reform
BERLIN, Jan 31 (Reuters) - German Chancellor Angela Merkel said ahead of a meeting with visiting Italian Prime Minister Mario Monti on Thursday that she was optimistic a deal on the European Union's long-term budget could be clinched soon.
Monti was visiting Berlin as part of a busy round of diplomacy to prepare a summit in Brussels next week at which EU leaders will discuss the 2014-2020 budget. The 27-nation bloc failed to agree a deal on its 1 trillion euro ($1.36 trillion)budget at a meeting in November.
"I am very optimistic that on the question of the long-term EU budget, we will be successful, that we will get an agreement," Merkel said, standing alongside Monti in the Chancellery in Berlin.
"Italy and Germany are both net payers, we have common interests. But of course these talks won't be easy and we can expect Italy to push its interests," she said.
Monti reiterated that his country's contribution to the EU budget was out of proportion to its real wealth. He called for a reform in the system of rebates and discounts "which currently benefits some countries and is financed by others".
"In the last 10 years Italy has become a net contributor and has paid more than could be justified by its relative level of prosperity, to the point that in 2011 it was the top net contributor to the EU budget," Monti told reporters.
Monti met European Commission chief Jose Manuel Barroso and European Council head Herman Van Rompuy earlier on Thursday in Brussels and will hold talks with French President Francois Hollande in Paris on Sunday, he said.
Merkel meets Spanish Prime Minister Mariano Rajoy in Berlin next Monday and is expected in Paris on Wednesday for a meeting with Hollande.
Monti, the technocrat who replaced Silvio Berlusconi as premier in November 2011 when Italy was struggling to avoid being sucked into the euro zone debt crisis, is competing in February's election against populist promises of tax cuts and growth from the centre-right.
"In Italy's view it is essential that the (EU) financing plan be designed to sustain economic growth, employment and socio-economic cohesion in Europe," said Monti.